UNITED STATES (AP) – The stock market closed out its worst week in more than two months on Friday as a second straight day of turbulent trading ended with more losses.
The S&P 500 fell 0.8 per cent, although the index did claw most of the way back from a 3.1 per cent skid earlier in the day.
A slide in technology stocks again did much of the damage.
The two-day sell-off came after the S&P 500 set new highs earlier in the week and had its best day in nearly two months. There wasn’t a particular catalyst for continued selling in the high-flying tech sector, but analysts noted that those stocks had posted gigantic gains so far this year that many thought were overdone.
“We had a fast and furious rally at the end of August and we’ve given it back,” said Head of Institutional Equity Strategy at Stifel Barry Bannister. “Investors are like a herd of gazelle on the Serengeti; it doesn’t take much to spook them. They’re alarmed and on the move.”
The selling followed a Labor Department report showing that United States (US) hiring slowed to 1.4 million last month, the fewest jobs added since the economy started bouncing back from the initial shock of the pandemic, even as the nation’s unemployment rate improved to 8.4 per cent from 10.2 per cent. The US economy has recovered about half the 22 million jobs lost to the pandemic.
The S&P 500 fell 28.10 points to 3,426.96. The Dow Jones Industrial Average lost 159.42 points, or 0.6 per cent, to 28,133.31. The index had swung sharply during the day, between a loss of as much as 628 points and a gain of as much as 247.
The technology-heavy Nasdaq dropped 144.97 points, or 1.3 per cent, to 11,313.13. The slide added to the index’s five per cent skid from the day before.
The VIX, a gauge of how much volatility investors expect in the market, has been rising. Even so, traders were not shifting funds into traditional safe-haven assets like US government bonds and precious metals, a sign that the sell-off was not necessarily a reaction to jitters about the economy.
“A lot of people were piling into the (tech) trade and there are a lot of gains to be made,” said Stephanie Roth, portfolio macro analyst at JP Morgan Private Bank. “This is more an instance of profit-taking, rather than true panic.”
She noted it’s not unusual for traders to pocket recent gains ahead of a holiday weekend. US markets will be closed tomorrow for Labor Day.
The 10-year Treasury yield rose to 0.72 per cent, up from 0.62 per cent late Thursday, a big move. The higher yields helped send financial stocks higher, since banks can lend money at higher rates once yields rise in the bond market. Capital One Financial rose 4.7 per cent.
Thursday’s sell-off followed a euphoric rise in recent weeks led by big technology stocks. Investors have been betting technology companies will keep making huge profits as people spend even more time online with their devices during the pandemic, making new market darlings of companies like Zoom Video Communications as many Americans work remotely and students do online learning.
Some of the tech high flyers racked up more losses on Friday. Nvidia fell three per cent, though the chipmaker is still up more than twofold this year.
Apple was down for much of the day before ending with only a 0.1 per cent gain, Amazon dropped 2.2 per cent and Zoom fell three per cent. And yet, Apple is still up 64.8 per cent this year, while Amazon is up 78.3 per cent. And Zoom is up more than 443 per cent for the year.